Episode 606: Spreadsheets!

Note: This episode originally ran in 2015.Spreadsheets used to be actual sheets of paper. Sometimes, a bunch of sheets of paper taped together.

Any calculation made on a spreadsheet was done by hand, and these could take days to complete for an accountant or bookkeeper. It was tedious. One little adjustment to these calculations meant a whole day of erasing and filling the same boxes out again.

Then, in the late '70s, a bored student invented the electronic spreadsheet. It transformed industries. It created new jobs, and destroyed others.

But its effects ran deeper than that. It changed the way we assigned value, and made decisions.

As one journalist wrote more than 30 years ago, "The spreadsheet is a tool, and it is also a world view — reality by the numbers."

Today on the show, how the spreadsheet transformed not just finance but health, entertainment, and almost everything else.

GOLDSTEIN: I recently came across this article from 1984. It's an article about this new, possibly dangerous thing that is about to transform the world.

DAVID KESTENBAUM, HOST:

And if you've read the title of this episode, you already know what it is. But let me just read you a little excerpt from the article because - because I love it. Here - when you, quote, "boot the program into your personal computer, you see little more than some letters running across the top of the display screen and some numbers running down the side." The, quote, "cursor, a tiny block of light on the screen that acts like a kind of electronic pencil" - not bad - "can be moved," - parentheses - "(by a touch of the computer keyboard) to any cell in order to," quote, "input numbers or formulas."

GOLDSTEIN: It's funny. When we were putting this together, I thought it was going to be totally obvious what that's describing.

KESTENBAUM: (Laughter).

GOLDSTEIN: But, like, actually, if you don't know already what the show's about, it's kind of confusing. Like, you might not guess that, in fact, that article is about the spreadsheet, the thing we think of today as Microsoft Excel.

KESTENBAUM: The article talks about how this weird thing is going to totally transform the business world. But it also has this warning - quote, "the spreadsheet is a tool, and it is also a worldview - reality by the numbers." The article spends a long time sort of dwelling on this. What does it mean when people start to think that numbers are reality? What will it do to the world?

(SOUNDBITE OF BRIAN FLORES, JAMES DRISCOLL, JOHN HUNTER JR. AND JONATHAN SLOTT'S "SUBLIMELY")

GOLDSTEIN: Right. It's 30 years after that article was written. And we know the answers to those big questions. Today on the show, reality by the numbers, what the spreadsheet has done to us.

(SOUNDBITE OF BRIAN FLORES, JAMES DRISCOLL, JOHN HUNTER JR. AND JONATHAN SLOTT'S "SUBLIMELY")

GOLDSTEIN: There was a time when a spreadsheet was an actual sheet.

KESTENBAUM: Eleven inches by 17 inches.

GOLDSTEIN: Yeah, a sheet of paper. I talked to a guy named Alan Snyder (ph). He was an accountant in the '70s. And he said he used spreadsheets all the time. Sometimes, one sheet was not enough.

ALAN SNYDER: So we would have to tape the sheets together.

GOLDSTEIN: So did you have, like, a really big desk? Like, how do you even manage something...

SNYDER: (Laughter). It took - yeah, I mean, it took the greater part of a full-sized desk.

KESTENBAUM: What a spreadsheet does is it gives you a detailed way to look at a business - really, any business. So if you're in the chocolate business, you would put into a spreadsheet the cost of cocoa, the cost of sugar, your taxes, your rent, salaries, all that stuff.

GOLDSTEIN: Also sales - right? - how much money you're going to get for the stuff you sell.

KESTENBAUM: Oh, yeah, you are going to bring in some money, not just spend it. And then you would do a whole lot of arithmetic and math. And at the end of that, you would have a pretty detailed picture of your business and how it was doing.

GOLDSTEIN: And if you're running the chocolate factory, you get your accountant to do this for you. You go to a guy like Alan Snyder and say, put together this spreadsheet for me. And that could take Alan and his whole team days, right? But once he'd built this thing, it would have hundreds of different numbers running around in it. And then - it never failed - after Alan had put this whole thing together, the guy who ran the factory would come to Alan and say, what if I spend just a little more on cocoa? What would that mean for my business?

KESTENBAUM: That little question would mean a lot of work for Alan.

SNYDER: You'd take out that large eraser and start erasing. Each of these - (laughter) - you'd take out a calculator. Then you'd have to re-add and then cross-add each column. And then you'd have different tax results. You'd have a different accrual result. You'd have a different cash result. Every column had to be changed.

KESTENBAUM: Alan said it could take a day - like, a really boring day - to run all the numbers. And that was just when the client had asked for one tiny, little tweak.

GOLDSTEIN: So OK, it's the late '70s. And not far from where Alan is working, there's a guy named Dan Bricklin sitting in class, bored out of his mind.

KESTENBAUM: He's the guy who's about to invent the spreadsheet.

GOLDSTEIN: Yeah, the future inventor of the spreadsheet is, at this moment in our story, sitting in class. He's at Harvard Business School in this big lecture hall. And up at the front of the room, there's a professor, up on the blackboard, doing some spreadsheet-type math. And Bricklin has this daydream.

DAN BRICKLIN: I thought that, you know, it's kind of silly that we're writing on this blackboard, where I can't - if only we had a blackboard where I could erase a number and write a new number in and everything would recalculate.

GOLDSTEIN: This was a timely moment to have this daydream. The Apple II computer had come out. It's a computer, finally, that you could have at home. You could put it on your desk. But of course, at the time, most people thought of it basically as a toy. They thought of it like a video game console.

KESTENBAUM: Bricklin looks at the Apple II and thinks, you know, this could be my magic blackboard. He thought it could do what accountants were doing on paper with their giant spreadsheets and their erasers. So he wrote a little program for the Apple II. He needed some way - right? - for the user to move around the screen to enter in the numbers. And there was no mouse. But the computer had those video game controllers. So he used those.

BRICKLIN: The Apple II had paddles for playing Pong, where you could turn it left and right. It was a dial. And there was a button to push to fire, you know? And to point, you would turn the dial back and forth. And the cursor would move from cell to cell. And then you push the fire button, and then it would go up and down as you turned it. So you could actually - kind of like a real poor man's mouse.

KESTENBAUM: Can I say, I love this early version of the spreadsheet with the video game paddle?

GOLDSTEIN: A side note, Bricklin said, in addition to Pong, you could also a little later play Space Invaders with it. But the downside, he said, actually for moving around a spreadsheet, the paddle was a huge pain in the ass. He wound up ditching it and going with the arrow keys. But anyways, his program - the thing he built - it actually worked.

BRICKLIN: You could run this thing, and it would actually calculate. It'd go (imitating computer sound) bum bum. You would put a number in and hit return. And everything would recalculate. And you could watch it. You could watch the number change - (imitating computer sound) bum bum bum. It made sound. I had a real prototype.

GOLDSTEIN: I love it. I love it. It made sound.

KESTENBAUM: The audio spreadsheet.

GOLDSTEIN: Actually, that was another problem in the early model. He said it took up a crazy amount of memory to make the sound. So he killed the sound, too.

KESTENBAUM: All right, so what happens next?

GOLDSTEIN: So next, he hooks up with his old friend, this guy named Bob Frankston, also a computer guy.

KESTENBAUM: A guy today known as the co-creator of the spreadsheet.

GOLDSTEIN: That's it, right, his early partner. And Frankston and Bricklin, they start giving demos around town, basically showing this prototype to guys like Alan Snyder, to accountants with big erasers. Alan Snyder saw an early demo - did not get it.

Do you remember the first time you saw an electronic spreadsheet?

SNYDER: Yes. But I didn't understand what was going on.

(LAUGHTER)

KESTENBAUM: You can understand, right? The computer is this new thing. And the demo, like - the guy's hands are, like, moving really fast over the keyboard. The cursor's just moving around. And the guy says, this will be really great for your checkbook. And he's like, I don't get it. I don't get it. The time it finally made sense to him is when he actually saw it being used in the real world. Then he was like, oh, it's a spreadsheet. It's a giant piece of paper, but it's inside the computer.

GOLDSTEIN: Yeah, this happened for him not long after that super confusing demo. It was at a local computer shop. The owner was testing out this program for Dan Bricklin, and he was using it for the store. He'd put in, you know, the basic stuff of his own business - his payroll, his rent, his supplies, his sales. And he showed this to Alan. And then, he did this key thing. He said to Alan, OK. Here's my business. Watch; I'm going to change one number. And suddenly, boom. Everything recalculates automatically.

SNYDER: Once he did that, I mean, it was like an immediate reaction of - to me. I mean, I just was - I was flabbergasted. I said, this is amazing. This is amazing. And it was.

GOLDSTEIN: Alan managed to get his hands on one of those early test versions. And then, not long after that, when the spreadsheet software actually hit the market - it was sold under the name VisiCalc - Alan became the first registered owner. Alan Snyder, spreadsheet user number one.

SNYDER: For anybody working with spreadsheets - mainly accountants - I mean, this was like a godsend. I mean, you wouldn't have to do this drudgery work over and over and over again.

KESTENBAUM: It was a godsend. But it was also a threat because the computer could do in seconds what it used to take someone an entire day to do. In fact, the computer was better at it. The computer didn't make mistakes.

GOLDSTEIN: And that magazine article from 1984 that we talked about at the top of the show, there's this amazing little anecdote about an accountant right after the electronic spreadsheet came out. And what happened was this accountant, he got a rush job from one of his clients. It was the kind of thing that in the old paper universe would've taken a couple days. This guy has this new electronic spreadsheet. So he plugs in the numbers, does the work in just a couple hours. Then, what he does - he just waits, let's the thing sit on his desk for, like, two days, FedExs it back to the client. And the client was like, wow, you did it so fast.

KESTENBAUM: It's a funny story. But clearly, like, that was not going to be a long-term strategy, right? If it only takes a couple hours to do a spreadsheet and you're billing by the hour, you're going to make less money for a particular job, right? You're going to need fewer workers. You're going to need to get rid of some people.

GOLDSTEIN: And, in fact, if you look at the numbers - just the, you know, national jobs data from the government - you can see this. The number of accounting clerks and bookkeepers, who are the kind of people who actually do a lot of this math, those numbers have fallen over the past several decades. A lot of people got replaced by software.

KESTENBAUM: Dan Bricklin says he thought about this when he was inventing the spreadsheet.

BRICKLIN: That was an issue I had to come to terms with. Technology is a double-edged sword. I produce general-purpose tools that can be used for all sorts of things. Some are good, and some are bad. Some will cause people to lose their job. Some makes new jobs possible.

KESTENBAUM: He was right. The spreadsheet both killed jobs and it created jobs. While the number of bookkeepers and accounting clerks fell, the electronic spreadsheet actually meant more jobs for regular accountants.

GOLDSTEIN: A few numbers - since 1980, right around the time the electronic spreadsheet came out, 400,000 bookkeeping and accounting clerk jobs have gone away. But 600,000 accounting jobs have been added.

KESTENBAUM: What happened is that accounting basically became cheaper. And sometimes, when something gets cheaper, people buy a lot more of that thing. Alan said clients bought more accounting. They called up asking him to run more numbers for them.

SNYDER: You could play the what-if game. You know, what if I did this instead of that?

KESTENBAUM: If you're that person who owned the chocolate factory, you could now call up Alan Snyder and ask all kinds of questions. What if we made our chocolate bars a little bit smaller? What if we made them 2 percent larger? Can we give everyone a raise this year? What if we started selling a lot of chocolate bars to China? All these questions, normally, it would've been very expensive for Alan Snyder to do it out on paper. But now it was much cheaper. So people asked a lot more questions.

GOLDSTEIN: VisiCalc, this software Dan Bricklin wrote, it becomes the killer app for the Apple II. It's the $99 piece of software that makes people go out and buy the $2,000 computer. And this actually went way beyond accountants.

BRICKLIN: It let doctors do better calculations for anesthesiology before the -their open-heart surgery. It was used by a company to decide where to put which slot machines on the casino floor. My mother, who was a principal of a middle school, she was using the spreadsheet to be able to keep track of who's in what class and all. And it wasn't until a couple of years later, she said, Daniel, do you know that it can do calculations? I said, Mom, I gave you demos.

GOLDSTEIN: Come on, Mom. So - right. So there's all these examples of people sort of using spreadsheets to kind of tweak what they do. But on top of that, there is one industry that Bricklin didn't mention there where spreadsheets were a monumental deal, where spreadsheets became the center of the world. Will have that and more in just a minute. Spreadsheets transformed one industry more than any other. That industry is finance. Spreadsheets basically gave birth to modern Wall Street, to this world we have today.

KESTENBAUM: Wall Street became obsessed with this what-if question. What if we got a slightly better interest rate on our loan? What if these two companies merged? What if we structured the deal this way? Wall Street is the place where, you know, you change one number, you move pennies around in a spreadsheet, you change something at, like, the third decimal place, and suddenly, at the bottom of the spreadsheet, the last number is, like, a million dollars larger.

GOLDSTEIN: And so because of this, the spreadsheet becomes the language of Wall Street. Today, the spreadsheet is the way people in finance talk to each other. It's the way they decide, is this a billion dollar deal? Is this a $950 million deal? Should we do this deal at all? Wall Street is basically a bunch of Excel spreadsheets flying back and forth.

KESTENBAUM: Which explains the existence of this.

(SOUNDBITE OF ARCHIVED RECORDING)

UNIDENTIFIED CROWD: (APPLAUSE).

KESTENBAUM: That is the sound of nerds clapping.

GOLDSTEIN: Give it up for ModelOff 2014, basically, like, the world championships of building financial models in Excel. It's an annual contest. And people actually fly in from around the world to see who's best at making financial models.

KESTENBAUM: The big prize comes with a little Excel joke.

(SOUNDBITE OF ARCHIVED RECORDING)

UNIDENTIFIED MAN: And so it's with great pleasure that I'm going to be presenting this trophy with this golden keyboard. And this golden keyboard does not have an F1 key.

(LAUGHTER)

GOLDSTEIN: David, I'll be honest with you. I did not get this joke, had to Google it. Here it is. The F1 key, it launches the help menu. Of course, these guys don't need it, right? Excel humor.

(SOUNDBITE OF ARCHIVED RECORDING)

UNIDENTIFIED MAN: This year's winner for first prize of the 2014 Financial Modeling World Championships, Diarmuid Early.

(APPLAUSE)

GOLDSTEIN: Did people make fun of you for winning?

DIARMUID EARLY: Not actually as much as I expected they would. It was like, at least you're the best at it.

GOLDSTEIN: You're the king of the nerds.

EARLY: (Laughter) You could say that.

GOLDSTEIN: I say that as a nerd who is not king of the nerds, to be clear.

Diarmuid works literally on Wall Street, at the Deutsche Bank office down by the New York Stock Exchange. I visited him there a couple weeks ago. And if you've ever wondered what it looks like inside a big, fancy office tower on Wall Street, you can just picture row after row, office after office, of people staring at spreadsheets.

In this building right now, how many people do you think are using spreadsheets - at this exact moment?

EARLY: Probably thousands of people, at this exact moment, using spreadsheets.

GOLDSTEIN: In this building?

EARLY: In this building, yeah.

GOLDSTEIN: Here, the mouse is for the slow, for the week. If you're a badass like Diarmuid, you use the keyboard.

GOLDSTEIN: There's even this story. And OK, it's probably an apocryphal story. But still, it's a story about bank analysts going around and cutting the mouse cords of the rookies they see using the mouse in Excel.

KESTENBAUM: That spreadsheet article from 1984 basically predicted all of this. Here is one line, quote, "a virtual cult of the spreadsheet has formed, complete with gurus and initiates, detailed lore, arcane rituals and an unshakable belief that the way the world works can be embodied in rows and columns of numbers and formulas."

GOLDSTEIN: The article worries, in what feels like this very '80s, early computer era way, about that unshakable belief. It says, quote, "people tend to forget that even the most elegantly crafted spreadsheet is a house of cards, ready to collapse at the first erroneous assumption."

KESTENBAUM: Turns out, that was actually a fine worry to have. You may remember the London Whale story from a couple of years ago about a trader at JPMorgan who lost the bank $6 billion. That was partly a spreadsheet error.

GOLDSTEIN: I talked about the London Whale with Matt Levine recently. Matt used to work at Goldman Sachs. Now he writes for Bloomberg. And Levine says somebody working with the London Whale built a spreadsheet to estimate how risky the group's trades were, but there was a problem.

MATT LEVINE: There was one cell where he had to divide by the average of two numbers. And he divided by the sum of those two numbers. And he forgot to put in the two at the end. And so that showed half as much risk as they actually had. And so then, everyone was deceived about how much risk they had.

KESTENBAUM: This is the thing about spreadsheets. They look really good no matter what goes into them. Someone brings a spreadsheet into a meeting, it looks so precise. It's got numbers and graphs and pretty fonts. It feels like it's telling you exactly how the world is. It feels like truth. Though, of course, it's just a model. It's just a guess.

LEVINE: It's particularly a problem with spreadsheets because they're very easy to use. So it's really easy for, like, a 22-year-old right out of college to use Excel and to build something that really looks like a cool model.

GOLDSTEIN: But Levine says, you know, most people are smart enough to understand the difference between the model and reality. He says most of the time, people get the math right. So on balance, spreadsheets, Levine says, actually a good tool. They give us more information. They help people make better decisions. It's a win. It's a plus - net plus.

KESTENBAUM: Spreadsheets have left us in a different world, though. It's a world where we are constantly asking what if. And by we, I mean not just accountants and people on Wall Street. Like, all of us - me more than I would like. It's gone way beyond spreadsheets. It's like, what if I flew Thursday instead of Friday? What if I took 78 instead of Route 280? Where is traffic better? What if I stopped exercising? What if I ate more vegetables?

GOLDSTEIN: Those last couple kinds of questions about, like, what if I ate differently; what if I exercised more or less - Diarmuid, our Excel champ, he can actually answer those questions for you because, of course, he built a spreadsheet. A couple of years ago, he wanted to start tracking all this personal information. So he whipped up a little spreadsheet, enters all this data every day. And now he's got all these pretty graphs of his weight and his exercise.

GOLDSTEIN: That article that inspired this show, it was called "A Spreadsheet Way Of Knowledge," by a guy named Steven Levy. We'll have a link to it on the blog at npr.org/money. Email us at planetmoney@npr.org or find us on Facebook or Twitter. Today's show was originally produced by Jess Jiang. Today's version was produced by Elizabeth Kulas.

If you're looking for something else to listen to and you have kids and you want to listen with your kids, try Wow In The World. It's a podcast from NPR for kids. You can find it on the NPR One app at npr.org/podcast or wherever you get your podcast. I'm Jacob Goldstein. Thanks for listening.

KESTENBAUM: Can I make a confession?

GOLDSTEIN: Go on.

KESTENBAUM: I have a spreadsheet where I track my electricity meter.

GOLDSTEIN: Oh.

KESTENBAUM: So I can see (laughter) - so I can see what difference it makes if I take a shorter shower.

GOLDSTEIN: I'm not saying oh because like, oh, you use a spreadsheet, or you're a nerd. I'm saying, oh, because, like, it's so cheap, it's painful.

KESTENBAUM: Knowledge is not always good.

GOLDSTEIN: How much does a shower cost?

KESTENBAUM: About a buck.

GOLDSTEIN: Really, a buck for one shower?

KESTENBAUM: Bath for the kids last night was like a buck-fifty or a buck-seventy.